Car Dealership Agreement Guide

Shopping for a car is no walk in the park. It involves finding the right vehicle, haggling for a fair deal, enduring the financial and insurance procedures, and, in the end, dealing with the complex car dealership agreement. This document outlines the sale price, fees, taxes, trade-in information, and more.  

Let’s face it- car dealers sell numerous cars every month, making them seasoned pros when it comes to these purchase agreements. On the other hand, most of us only buy a car once every few years, if that. So, who do you think really knows the ins and outs of this contract – the dealer or the customer?  

The answer is pretty clear.  

That being said, it’s not wise to just blindly sign that agreement. We strongly recommend reading through the rest of this guide.  

What Are Included in Your Car Dealership Agreement? 

For many of us, buying a car is the second most significant financial transaction in our lives. That’s why it’s crucial to fully understand what you’re agreeing to. You should be on the lookout for any hidden fees or unexpected add-ons the dealer might include in your purchase.  

So, without further delay, let’s get started.  

TILA (Truth-in-Lending Act) 

If you’re financing your car purchase, the initial section of your new car dealership agreement will include information mandated by the federal Truth-in-Lending Act, often abbreviated as “TILA.” It’s important to note that if you’re not financing your purchase, you won’t find this information on your contract.  

This Truth-in-Lending Disclosure section comprises four crucial components:  

• Annual Percentage Rate (APR)- This is the annual cost of credit, expressed as a percentage. It gives you a clear idea of the overall credit cost.  

• Finance Charge- Represented as both a percentage and a dollar amount, the finance charge encompasses the total interest and specific fees you’ll pay throughout the loan’s life, assuming you make all payments on time.  

• Amount Financed– This is the dollar amount of credit extended to you, typically equivalent to the amount you’re borrowing.  

• Total of Payments– This figure represents the total sum of all payments you’ll make by the end of the loan term, including the repayment of the principal loan amount and all finance charges.  

By law, the dealership is required to discuss each of these four components with you. Experienced finance managers often mark the boxes on the contract using the back of their pen to create a record that they reviewed the document with you.  

Breakdown of Payment Schedule 

Directly below this section, you’ll find a breakdown of your payment schedule. This should match the loan financing option you selected.  

Further down the car dealership agreement, you’ll encounter various disclaimers. One of them is particularly significant, stating that there’s no penalty if you decide to pay off your loan ahead of schedule. Always keep this in mind when financing your vehicle purchase.  

Detailed Purchase Breakdown  

Following the initial financial disclosures, the car dealership agreement delves into a comprehensive breakdown of all its components. This section is designed to provide a transparent view of your purchase, outlining what you’re acquiring and the financing required for it. While this section might appear perplexing to some, we’re here to simplify it, line by line. You can always return to this guide when you’re reviewing your contract in the future.  

• Cash Price- The first item on this detailed breakdown is the cash price, also known as the selling price of the vehicle. This figure, when combined with the doc fee, constitutes the entire cash price or selling price of your purchase.  

• Down Payment– The down payment segment pertains to any funds you’re putting down for the purchase. If you’re trading in a vehicle, this includes a trade-in allowance, payoff, and net trade-in value.  
• Remaining Balance After Down Payment– Simply put, this is the cash price of the vehicle minus the down payment you’ve made.  

Expenses Paid on Your Behalf 

As the name suggests, this part accounts for any expenses being covered by you for third parties. If you notice “N/A” across the board. This signifies that the customer didn’t include their taxes, title, and registration costs in the loan for their purchase.  

Instead, they settled these fees independently when registering the car under their name. Typically, this section will feature various figures that differ from state to state, reflecting the variations in sales tax, title fees, and registration costs.  

Total Amount Financed 

The grand total you’re financing can be found by adding up the Remaining Balance After Down Payment and Expenses Paid on Your Behalf. In essence, it’s the unpaid cash balance plus the expenses paid to third parties on your behalf.  

The Official Vehicle Purchase Agreement  

Surprisingly, all that we’ve discussed up to this point isn’t the actual car dealership agreement; it’s the retail contract mandatory for financed purchases. If your vehicle purchase doesn’t involve financing, you won’t need to go through a document like the one we’ve previously discussed. Instead, you’ll encounter something similar to what we’re about to delve into – the genuine purchase agreement.  

This purchase agreement essentially restates the contents of the retail contract, albeit in slightly different sections of the document. Additionally, it includes a couple of other noteworthy elements, with two standing out in particular:  

• The Buyer’s Trade-in Certification– This is where you affirm the details of your trade-in, ensuring everything is accurately represented.  

• The Warranty Disclaimer and Documentation Fee Notice– Here, you’ll find crucial information about warranties and documentation fees. These sections are vital, so pay close attention to them.  

Certification for Your Trade-In  

This segment of the car dealership agreement is relevant only if you’re trading in a vehicle as part of your purchase. When you put pen to paper on the contract, you’re certifying that:  

• The vehicle title is not branded as salvaged.  
• The airbags are in proper working condition.  
• The odometer reading has not been tampered with.  
• The emissions system remains unaltered.  

Should any of these conditions go unmet, or if you fail to disclose them to the dealer, it could potentially nullify the transaction. In all scenarios, honesty is the golden rule, so it’s essential to be forthright before finalizing the agreement.  

Warranty Disclaimer and Document Fee Notification  

Now, let’s focus on the last segment of the car dealership agreement – the warranty disclaimer and the notice about documentary fees.  

The warranty disclaimer emphasizes that the purchase is being made “as-is,” with no additional warranties from the dealer. As clarified in the disclaimer, any warranties from the manufacturer are independent of the dealer, and you can make use of them at any location supported by the manufacturer, not solely at the dealership where you’re making your purchase.  

Doc Fee Notification 

Beneath the warranty disclaimer, you’ll find the notification regarding the documentary fee. This section explains the reason behind the inclusion of a “doc fee” in your car dealership agreement. It’s worth noting that doc fees vary from state to state.  

As we’ve discussed before, convincing a dealer to remove the doc fee from their contract is typically challenging. However, you can negotiate with them to offset the fee by reducing the vehicle’s cost. 

The car dealership agreement and retail purchase contract may appear daunting at first glance, but don’t let that deter you from understanding how to interpret these documents. Our aim is for you to feel at ease and in control when you go over them with the finance manager during your purchase.  

Always remember, it’s perfectly fine to ask questions when you’re uncertain about something. If there’s anything you don’t comprehend, seek clarification. Never sign a document unless you are entirely certain about what you’re committing to. Rest assured, you are in control, and now you’re well-informed about what to look for.  

Understanding the Essentials of a Standard Vehicle Purchase Agreement  

In a car dealership agreement, you’ll come across a variety of terms, but typically, four key components are standard:  

Buyer and Seller Personal Details 

This section entails the vital personal information of both parties involved, including names, addresses, and contact numbers.  

Vehicle Information 

Here, you’ll find essential details about the vehicle, such as the year, make, model, and the all-important Vehicle Identification Number (VIN). Additionally, the car dealership agreement should outline the car’s condition, including any existing damage.  

The VIN holds particular significance as it serves as a unique identifier for the vehicle. This ensures absolute clarity regarding the car being sold, whether it’s brand new or a pre-owned one. Moreover, for buyers’ peace of mind, the VIN can be cross-checked with national registries or the police to verify that the vehicle is not stolen.  

If you’re the buyer, it’s crucial to confirm that the VIN in the contract matches the information in the registration documents and the actual vehicle. Typically, you can locate the VIN on the front windshield or on the driver’s side door.  

Vehicle Condition Details 

This section serves to specify the present condition of the vehicle, whether it’s brand new or pre-owned, and whether there are any missing components or unique features.  

Before sealing the deal, it’s advisable to negotiate this aspect with your partner. This car dealership agreement helps both parties to concur on the final amount and the vehicle’s current state.  

For instance, if a car is advertised at $3000, and you, as the buyer, notice a malfunctioning AC, you can propose a reduced price, say, $2500. If the seller accepts your offer, it’s essential to document this arrangement in the contract.  

To do so, you’ll need to modify the total sales price field and include the “other provisions” section, stating that you’ve received a discount due to the AC issue.  

This detail holds significant importance for both the buyer and the seller. It ensures clarity about any parts of the vehicle that might require repair or replacement, such as brakes, shocks, and more.  

6 Crucial Aspects to Review in Your Car Purchase Agreement Before You Sign  

Verify Personal Information 

Ensure that all personal information for both the buyer and seller is accurate before signing the car dealership agreement. Mistakes in addresses or phone numbers can lead to communication challenges later, especially with entities like banks for financing. Data entry errors are not uncommon, so meticulously review the seller and buyer details to prevent potential issues, such as delays in documentation from credit companies.  

It’s crucial to address any inaccuracies, as changes made after signing require approval from all parties involved.  

Watch for Hidden Fees 

Be attentive to any undisclosed fees on your car dealership agreement, particularly when buying a used car from a dealership. Private sellers typically do not impose extra charges. Hidden fees can lead to confusion and frustration, so careful scrutiny is essential. Thoroughly read and understand all terms, conditions, and specifications. You have to ensure that they changed or added nothing after the review. Only sign when you’re certain that everything aligns with the agreed terms.  

Sellers should also ensure transparency by not including any unexpected or questionable fees, as these can cause complications later on.  

Review Agreed-On Free Items 

Double-check for any charges related to items that were initially agreed upon. If the used vehicle sale price does not include extra fees, then the buyer should not pay additional amounts. This includes services or parts that you agreed to be free of charge, such as inspections or repairs.  

Beware of Unrequested Additions 

For buyers, it’s essential to inspect used cars purchased from dealerships for unrequested additional options that may lead to unexpected costs. For sellers, be clear about vehicle specifications during negotiations to avoid surprises and additional expenses.  

Examine Financing Interest Rates 

When relying on financing to buy a used car, ensure that the interest rate is in the car dealership agreement. This is especially crucial if you’re obtaining financing from the same party you’re purchasing the car from. It’s not necessary when buying from a private seller and securing a car loan from your bank. Outling the interest rate clearly prevents post-agreement surprises and misunderstandings.  

When buying from or selling to a dealership, be sure to discuss and reach mutual agreements on various financing details, including the purchase price, financing terms, payment plan, finance charge, doc fee charges, annual percentage rate, and monthly payment arrangements in settlements.  

Specify Your Down Payment 

If you plan to make a down payment for your new vehicle, this detail should be in the car dealership agreement. Both parties need to agree on the amount of the down payment and the timeline for its submission to prevent any confusion or disputes in the future. Clarity in this matter is essential for a smooth transaction process.